ASSISSTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, AJMER vs. BARODA RAJASTHAN KSHETRIYA GRAMIN BANK, AJMER

PER GAGAN GOYAL, A.M: This appeal by the revenue and cross objection by the assessee are directed against the order of NFAC, Delhi dated 22.08.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The revenue has raised the following grounds of appeal: -

2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the written of advances of Rs. 1,37,05,000/- when the assessee has not debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.

In CO No. 19/JP/2024, the assessee has raised the following grounds: -

assessed at Rs. 171, 16, 33,482/- against the returned income of Rs. 168, 98,
64,432/- u/s. 143(3) r.w.s. 144B of the Act. The assessee being aggrieved with this order (disallowance of Rs. 2, 17, 69,052/- u/s. 43B of the Act) of the AO preferred an appeal before the Ld. CIT (A), fate is not known to us as there is no information placed on record before us. Later on a notice u/s. 148 of the Act was issued vide dated: 23.03.2021 for the reason that the assessee wrongly claimed expenses of Rs. 1,37,05,000/- under the head advances written off and also claimed expenses of Rs. 3,39,25,000/- on account of provision against the standard assets for the F.Y. 2016-17. 3
In response to the notice issued u/s. 148 of the Act, the assessee filed its return of income declaring income of Rs. 168,98,64,430/-. In response to the return filed the case of the assessee was assessed u/s. 147 r.w.s. 144B of the Act after adding amount of Rs. 1,37,05,000/- and Rs. 3,39,25,000/- claimed under the head advances written off and provision against the standard assets claimed respectively vide order dated: 25.03.2022. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), who in turn allowed the claim of the assessee w.r.t. expenses of Rs. 1, 37, 05,000/- under the head advances written off and restored the matter back to the file of the AO for examining the issue again pertaining to expenses of Rs. 3, 39, 25,000/- on account of provision against the standard assets in the light of R.B.I Guidelines. The revenue being aggrieved with the order of the Ld. CIT (A) preferred an appeal before us and the assessee approached this bench through the present Cross-Objection (C.O.).
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Here it is pertinent to mention that the ground taken by the assessee though this C.O. was not there before the Ld. CIT (A) and the same is first time raised before us, but following the principle laid down by the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 97 Taxman 358 (SC), wherein the Hon’ble Apex Court held as under:
“Under section 254, the Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254
only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department has a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
In the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688, the Court, while dealing with the powers of the AAC observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an additional ground raised by the assessee in seeking modification of 5

the order of assessment passed by the ITO. The Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.
The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.
The Tribunal has, therefore, juri iction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee.”
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In view of the above, despite the fact that this ground was not there before the Ld. CIT(A), still we deem it fit to entertain the same for curtailment of the legal dispute and to comply the directions of the Hon’ble Apex court in the case of National Thermal Power Co. Ltd. (supra). It is observed that the issue involved was discussed in detail during the original assessment proceedings, as demonstrated to us vide factual paper book filed before us. We have gone through the notice issued u/s. 142(1) of the Act vide dated: 26-12-2019, page nos. 7-8, assessment order passed u/s. 143(3) of the Act vide dated: 31-12-2019, page no. 4 (Para 7, S.
No. 5) and page no. 5 (Para 8, S. No. 3). It is categorically observed that the disallowances under consideration were duly enquired vide the notice mentioned
(supra), point no. 4 and were duly responded and explained by the assessee in its reply. Hence, there can’t be any allegation of escapement of income on assessee; rather it falls in the category of “Change of Opinion”.

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Moreover, the issues under consideration are already decided in favour of the assessee in its own case by the coordinate bench in ITA No. 272/JPR/2018,
A.Y. 2014-15, Dated: 17-05-2018 and in the case of Nagaur Urban Cooperative
Bank Ltd. vs. ACIT vide ITA No. 240/Jodh/2013, Dated: 29-11-2013. We have considered the submissions forwarded by the Ld. DR vide letter dated: 21.01.2015
also and found the same to be not in support of the department either justifying re-opening the matter or present appeal before us. Hence, the same is not relied upon by us.
7. For better understanding of the subject we are reproducing herein below the judicial pronouncements relevant to the matter as under:
[2025] 171 taxmann.com 52 (SC) PCIT vs. K.R. Jayaram
The Assessing Officer has no power to review; he has power to reassess. The power of reassessment has to be based on fulfillment of certain pre-conditions and if the concept of ''change of opinion'' is removed, then, in the garb of reopening the assessment, review would take place and the concept of ''change of opinion'' should be treated as an in-built test to check abuse of power by the Assessing
Officer. Thus, it is clear that the words ''reason to believe'' occurring in section 147 does not make a distinction in respect of reopening done within four years or beyond four years. [Para 11]
■ The provisos contained in section 147 impose conditions when reopening is done beyond four years and matters connected thereof. Thus, the common issue in all cases of reopening is whether the Assessing Officer had ''reason to believe'' that income chargeable to tax has escaped assessment. The reason to believe cannot be on a ''change of opinion''. The assessee is expected to file his return of income along with his books and documents. It is for the Assessing Officer to consider the same in accordance with law and complete the assessment.
The assessee is not there to advice the Assessing Officer as to how he should go about in assessing the income of the assessee, as it is the statutory duty of the Assessing Officer.
Admittedly, the sale deed is only the document, which is the subject matter of the assessment.
This document was very much available with the Assessing Officer when he completed the assessment under section 143(3). At that juncture, all that the Assessing Officer was concerned about is the claim made by the assessee as expenses for the improvement of the land by leveling, sand filling, road laying etc. [Para 12]

■ The stand taken by the assessee was disbelieved, as no material evidence was produced by the assessee to substantiate such expenses. Based on the very same document, the assessment was reopened by serving notice stating that the assessee should have adopted the value of the land as computed by the District Revenue Officer under the Indian Stamp Act for the purposes of computation of the stamp duty payable on such instrument. [Para 13]
■ The Tribunal rightly held that there was no material available with the Assessing Officer other than what was available with him at the first instance, when he completed the assessment under section 143(3) to come to a conclusion that there were reasons to reopen the assessment. [Para 15]
■ In the instant case, the only issue was the claim of cost of improvement against capital gains and there was no other issue. [Para 25]
■ For the above reasons, the Tribunal was right in allowing the assessee's appeal. [Para 27]

[2024] 169 taxmann.com 725 (SC) ACIT vs. Adani Power Rajasthan Ltd.
In light of the provision of section 37 of the IT Act, and section 135 of Companies Act, when the assessee was called upon to explain, the petitioner has explained vide objections and inter alia contended that by virtue of Explanation 2 attached to section 37 the Assessing Officer has erroneously concluded that such CSR expenditure cannot be allowed under section 37 and to that extent, there is escapement of income, the said conclusion is patently erroneous and as such, the action which is sought to be initiated is impermissible. In fact, as a matter of records, the assessee has made average net loss of Rs. 187.67 crores during three immediately preceding
Financial Years and as such, the assessee was not under obligation to spend any amounts toward CRS by virtue of section 135 and as such, the expenditure incurred by the petitioner is not the one which requires disallowance under Explanation 2 to section 37(1). The expenditure incurred is out of Commercial expenses and is fully allowable and further it is the stand of the petitioner that even it is not the case of revenue that expenditure if any for Explanation 2 to section 37 is not allowable expenditure and as such, the fundamental error appears to have been crept in. [Para 8]
Yet another substantial contention which has been taken is that reopening on the basis of audit party objection is not permissible. On the instant case on hand, one of the main contention is that audit party had expressed opinion which contention is also not stoutly contradicted. On the contrary, in the affidavit-in-reply filed by the revenue, justification is tried to be made that 8

reopening of the case on the basis of the factual error pointed out by the audit party is permissible under the law and as such, objection was not considered. [Para 10]
It further appears from the additional affidavit which has gone un-denied and on the contrary it has been substantiated that the revenue has objected to the issue about CSR on the basis of the objection raised by the audit party. It has been submitted that one of the director of the assessee Company submitted an application under section 6(3) of the Right to Information Act seeking information as to objection raised by the audit party and the reply of the same was given by Assessing Officer. The said information was provided in the form of order and it appears that step of reopening is on the basis of the objection raised by the audit party in the case of this very assessee and as such, also when the co-ordinate Bench has dealt with the issue as to whether on the strength of audit objections, reopening of assessment is permissible or not is clearly clinching the issue raised in the present proceedings and hence, it is answered in negative against the revenue. [Para 11]
Yet another circumstance which is also not in a position to be overlooked is that reopening of the assessment is on the basis of the change of opinion as well since the main step is sought to be initiated upon perusal of the assessment record for the year under consideration it appears that there is no application of mind while issuing impugned notice as well as disposing of objections. In fact, detailed scrutiny was undertaken and after satisfying himself, the Assessing
Officer has passed an order of assessment wherein neither there is any addition or disallowance of any claim is made and as such, on the basis of the same records, issuance of notice under section 148 tantamount to be on the basis of the change of opinion which is impermissible and since the said issue is now well settled, Court may not overburden the present order by incorporating the case law on the subject. On the contrary, Court also found from the contents of the objection that all details are consisting to computation of income, profit and loss figures and also tax audit report which are forming part of the assessment records, still in the absence of any tangible material, the respondent authority is trying to take a different view despite the original scrutiny of assessment is done. Under the circumstance, the action sought to be initiated is impermissible and a case is made out by the petitioner to call for interference. [Para
14]
In view of the aforesaid discussion case is made out by the assessee to quash and set aside the impugned notice as well as impugned order. [Para 16]
8. In view of the above factual and legal pronouncements, we do not have any hesitation in holding that re-opening in this case is merely a “Change of Opinion”
and there is no new material came before the AO, which justifies the action u/s.

147 of the Act. Rather, on similar issue the assessee’s own case is decided in its favour by the coordinate bench, and as a matter of judicial discipline department is duty bound to follow the same. May be, department is in appeal against the same before the Hon’ble Juri ictional High Court. But, till the outcome of the same decision, of the coordinate bench is binding on both the sides and has to be followed without question. In these terms discussed above C.O. filed by the assessee is allowed.
9. As the C.O. of the assessee has been allowed and the proceedings u/s.
147/148 of the Act is quashed, appeal of the revenue became infructuous, hence dismissed without any comments on the grounds raised.

Copy of the Order forwarded to:

BY ORDER,
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(Asstt.